[Federal Register Volume 85, Number 60 (Friday, March 27, 2020)]
[Notices]
[Pages 17374-17375]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-06392]
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SECURITIES AND EXCHANGE COMMISSION
[Release no. 33821]
Investment Company Act of 1940; Order Under Sections 6(c),
12(d)(1)(J), 17(b), 17(d) and 38(a) of the Investment Company Act of
1940 and Rule 17d-1 Thereunder Granting Exemptions From Specified
Provisions of the Investment Company Act and Certain Rules Thereunder
March 23, 2020.
The current outbreak of coronavirus disease 2019 (COVID-19) has
disrupted activities around the world. In light of the current
situation, we are issuing this Order providing exemptions from certain
requirements of the Investment Company Act. The exemptions provide
additional flexibility for (1) registered open-end management
investment companies other than money market funds (``open-end funds'')
and (2) insurance company separate accounts registered as unit
investment trusts (``separate accounts'') to obtain short-term funding.
In light of the current and potential effects of COVID-19, the
Commission finds that the exemptions set forth below, as applicable:
are necessary and appropriate in the public interest and
consistent with the protection of investors and the purposes fairly
intended by the policy and provisions of the Investment Company Act;
permit transactions the terms of which, including the
consideration to be paid or received, are reasonable and fair and do
not involve overreaching on the part of any person concerned;
permit transactions under the terms of which the participation
of each registered investment company is consistent with the
provisions, policies, and purposes of the Investment Company Act,
and not on a basis different from or less advantageous than that of
other participants; and
are necessary and appropriate to the exercise of the powers
conferred on it by the Investment Company Act.
The necessity for prompt action of the Commission does not permit
prior notice of the Commission's action.
I. Time Period for the Exemptive Relief
The relief provided in each of the following Sections of this Order
is limited to the period from (and including) the date of this Order to
(and including) the date to be specified in a public notice from
Commission staff stating that the relief will terminate, which date
will be at least two weeks from the date of the notice and no earlier
than June 30, 2020.
The Commission will continue to monitor the current situation and
may issue other relief as necessary or appropriate.
II. Ability of Open-End Fund or Separate Account To Borrow From an
Affiliated Person; Ability of an Affiliated Person To Make
Collateralized Loans
It is ordered, pursuant to Sections 6(c), 17(b) and 38(a) of the
Investment Company Act that:
For the period specified in Section I, an open-end fund or a
separate account is exempt from section 12(d)(3) of the Investment
Company Act to the extent necessary to permit it to borrow money from
any affiliated person, or affiliated person of such affiliated person,
that is not itself a registered investment company, and an affiliated
person of an open-end fund or separate account, or an affiliated person
of such affiliated person, is exempt from section 17(a) to the extent
necessary to permit it to make collateralized loans to such open-end
fund or separate account, provided that the conditions below are
satisfied.
For the period specified in Section I, an open-end fund is exempt
from section 18(f)(1) of the Investment Company Act to the extent
necessary to permit it to borrow money from any affiliated person, or
affiliated person of such affiliated person, that is not a bank and is
not itself a registered investment company, provided that the
conditions below are satisfied.
Conditions
(a) The Board of Directors of the open-end fund, including a
majority of the Directors who are not interested persons of the open-
end fund, or the insurance company on behalf of the separate account,
reasonably determines that such borrowing:
(i) Is in the best interests of the registered investment company
and its shareholders or unit holders; and
(ii) will be for the purpose of satisfying shareholder redemptions.
(b) Prior to relying on the relief for the first time, the open-end
fund or separate account notifies the Commission staff via email at [email protected] stating that it is relying on this Order.
III. Interfund Lending Arrangements for Registered Investment Companies
With Existing Interfund Lending Orders
It is ordered, pursuant to Sections 6(c), 12(d)(1)(J), 17(b),17(d)
and 38(a) of the Investment Company Act and rule 17d-1 thereunder that:
For the period specified in Section I, any registered investment
company currently able to rely on a Commission order permitting an
interfund lending
[[Page 17375]]
and borrowing facility (``existing IFL order'') may:
(a) Make loans through the facility in an aggregate amount that
does not exceed 25 percent of its current net assets at the time of the
loan notwithstanding any lower limitation in the existing IFL order;
(b) Borrow (if permitted under the existing IFL order to be a
borrower) or make loans through the facility for any term
notwithstanding any conditions limiting the term of such loans,
provided that (i) the term of any interfund loan made in reliance on
this Order does not extend beyond the expiration of this temporary
relief, (ii) the Board of Directors of the registered investment
company, including a majority of the Directors who are not interested
persons of the registered investment company, reasonably determines
that the maximum term for interfund loans to be made in reliance on
this Order is appropriate, and (iii) the loans will remain callable and
subject to early repayment on the terms described in the existing IFL
order; and
(c) Avail itself of the relief provided in Section V below
notwithstanding any condition of the existing IFL order that
incorporates limits set forth in its fundamental restrictions.
limitations or non-fundamental policies;
provided that, in each case:
(a) Any loan under the facility is otherwise made in accordance
with the terms and conditions of the existing IFL order;
(b) Prior to relying on the relief for the first time, the
registered investment company notifies the Commission staff via email
at [email protected] stating that it is relying on this Order;
and
(c) Prior to relying on the relief for the first time, the
registered investment company discloses on its public website that it
is relying on a Commission exemptive order that modifies the terms of
its existing IFL order to permit additional flexibility to provide or
obtain short-term funding from its interfund lending and borrowing
facility.
IV. Interfund Lending Arrangements for Registered Investment Companies
Without Existing Interfund Lending Orders
It is ordered, pursuant to Sections 6(c), 12(d)(1)(J), 17(b), 17(d)
and 38(a) of the Investment Company Act and rule 17d-1 thereunder that:
For the period specified in Section I, any registered management
investment company that is not currently able to rely on a Commission
order permitting an interfund lending and borrowing facility may
establish and participate in such a facility as set forth in an
exemptive order permitting such a facility that the Commission has
issued within the twelve months preceding the date of this Order
(``recent IFL precedent''); provided that:
(a) The registered investment company must satisfy the terms and
conditions for relief in the recent IFL precedent (including with
respect to whether it may participate as a borrower), except:
i. It may rely on the relief provided in Section III above subject
to its terms and conditions (other than the notice requirement of
condition (c) in Section III);
ii. It need not satisfy the condition in the recent IFL precedent
requiring prior disclosure in its registration statement or shareholder
report; and
iii. Money market funds may not participate as borrowers in the
interfund facility;
(b) Prior to relying on the relief for the first time, the
registered investment company notifies the Commission staff via email
at [email protected] stating that it is relying on this Order
and identifying the recent IFL precedent that it is relying on; and
(c) The registered investment company:
i. Discloses on its public website, prior to relying on the relief
for the first time, that it is relying on the relief to utilize an
interfund lending and borrowing facility.
ii. To the extent it files a prospectus supplement, or a new or
amended registration statement or shareholder report, while it is
relying on this relief, updates its disclosure regarding the material
facts about its participation or intended participation in the
facility.
V. Ability of a Registered Open-End Investment Company To Deviate From
Its Fundamental Policy With Respect To Lending or Borrrowing
It is ordered, pursuant to Sections 6(c) and 38(a) of the
Investment Company Act:
That for the period specified in Section I, an open-end fund is
exempt from sections 13(a)(2) and 13(a)(3) of the Investment Company
Act to the extent necessary to permit it to enter into otherwise lawful
lending or borrowing transactions that deviate from any relevant policy
recited in its registration statement without prior shareholder
approval; provided that:
(a) The Board of Directors of the open-end fund, including a
majority of the Directors who are not interested persons of the
investment company, reasonably determines that such lending or
borrowing is in the best interests of the registered investment company
and its shareholders;
(b) The open-end fund promptly notifies its shareholders of the
deviation by filing a prospectus supplement and including a statement
on the applicable fund's public website; and
(c) Prior to relying on the relief for the first time, the
registered investment company notifies the Commission staff via email
at [email protected] stating that it is relying on this Order.
By the Commission.
Vanessa A. Countryman,
Secretary.
[FR Doc. 2020-06392 Filed 3-26-20; 8:45 am]
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